WHAT IT MEANS WHAT IT MEANSWith global banks going bust every other day as the credit crisis spreads, Islamic finance institutions - which have remained resistant to its effects - are being mooted as more secure. Based on Islamic or Shariah law, which forbids the charging of interest, Islamic finance may even be a strong contender for an alternative banking system, says FNB and WesBank CE of Islamic finance Ebi Patel. Risk is shared between the customer and the bank on agreed terms. "Where banks that fell victim to the crisis effectively traded in paper, Islamic finance has to be underpinned by tangible assets," says Patel. Such a system, if Shariah-compliant, would not succumb to a credit crisis. But not all Islamic financial institutions have been unscathed. In SA, Futuregrowth Albaraka, a Shariah fund, has lost 30,4% in the past 12 months.Patel believes Islamic banking, which has a strict credit-rating system, could receive more attention internationally than in SA. There are ...
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